The Internal Revenue Service boosted the standard business-mileage deduction rate for cars to 48.5 cents a mile from the current 40.5 cents, the largest jump ever, IRS Commissioner Mark W. Everson announced yesterday.
The new rate became effective Sept. 1 and will remain in effect until the end of the year, the agency said. Businesses and individuals who use their cars for business are allowed to use the standard rate in lieu of keeping records of their actual expenses.
The IRS also increased the rate for computing deductible medical or moving expenses to 22 cents a mile, up from 15 cents. The rate for providing services to charity is set by law at 14 cents and would have to be changed by Congress, Everson said.
Everson noted that the business rate has not gone up as much as gasoline prices because it reflects all aspects of buying and operating a vehicle, including depreciation, insurance, tires and other costs. "The cost of the car is the biggest piece of it. Fuel is an important component but not the dominant component," he said.
He also cautioned that the IRS intends to wait until near the end of the year to set the 2006 rate, and it could be lower if, as some forecast, gasoline prices decline.
He declined to give a figure for lost revenue but said it would be several hundred million dollars.
-- Albert B. Crenshaw